Thursday, October 10, 2019

HHSE positioned to benefit from Interesting development in JSJ matter


The ongoing saga of abuse against HHSE by predatory-lender JSJ Investments took an unexpected turn yesterday with the filing of a “Cease & Desist” order from the Arkansas Securities Commission - regarding the convertible notes issued by Hannover House to JSJ back in 2014. 

Although we can take a good guess as to what the intentions were of JSJ in pursuing a complaint with the Arkansas Securities Commission… we do not think that they anticipated that the end result would be a legal declaration of the notes as being “illegal” due to non-registration. Since both Hannover House and JSJ utilized outside counsel to review the 2014 notes before execution – and neither company’s attorney advised that the transaction would need to be registered with the State of Arkansas – JSJ has effectively empowered a second cause of action for the Texas judgment to be dismissed.  

The first cause of action was that Hannover House (along with Standard Registrar) has been able to clearly prove that JSJ was fully compensated on the notes before they filed a motion for judgment.  Now, we can add that "subsequent actions have declared the notes illegal,” which impacts the legal enforceability of their judgment. For what it’s worth, a THIRD attorney (the counsel for Standard Registrar) also opined on the JSJ 2014 notes and did not declare that the transaction should be registered within the State of Arkansas. So, this development is quite surprising to many parties, but comes with a substantial and unexpected benefit to Hannover House.

In an immediate response, Hannover House has contacted the Arkansas Securities Commission – and we are now taking the steps of an appeal in order to have this administrative motion vacated and removed. Until that happens, Hannover House is prohibited from issuing any new “convertible” notes from within the State of Arkansas (which we weren’t doing anyway).  At such point in the near future that the company is fully-reporting and fully-registered with the S.E.C. (i.e., Form 10), the need for registration of future convertible notes with the State of Arkansas will no longer apply.   

In the phone call with the Arkansas Securities Commission Deputy Director today, it was revealed that Hannover’s use of the FAYETTEVILLE (and previously SPRINGDALE) addresses on the company’s various OTC Markets filings was the basis for declaring that the notes fell under the jurisdiction in Arkansas. Had the company listed a physical office in Casper, Wyoming (for instance)  where the company is incorporated, this action in Arkansas may have not have proceeded.

Hannover House has contacted our Dallas-based attorney James Carroll with this new information regarding the motion for dismissal to include this second cause of action in Hannover’s favor.

STAY TUNED!